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Jack Hammer invests in a stock that will pay dividends of $2.00 at the end of the first year; $2.20 at the end of the second year; and $2.40 at the end of the third year. Also, he believes that at the
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16 votes
16 votes
Jack Hammer invests in a stock that will pay dividends of $2.00 at the end of the first year; $2.20 at the end of the second year; and $2.40 at the end of the third year. Also, he believes that at the end of the third year he will be able to sell the stock for $33. What is the present value of all future benefits if a discount rate of 11 percent is applied

User MrJM
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1 Answer

15 votes
15 votes

Answer:

$29.47

Step-by-step explanation:

Present value is the sum of discounted cash flows

Present value can be calculated using a financial calculator

To find the PV using a financial calculator:

Cash flow in year 1 = 2

Cash flow in year 2 = 2.2

Cash flow in year 3 = 2.4 + 33

I = 11

PV = 29.47

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.

3. Press compute

User Johannes Wanzek
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